Stablecoins are part of the Consumer Financial Protection Bureau’s (CFPB) probe into big tech, as it believes their growing use poses a risk to the financial system.
During his first appearance before Congress as Director of the CFPB, Rohit Chopra explained how stablecoins were a key part of a wider probe into big tech, which is primarily focusing on how large tech companies like Facebook collect and use their consumer data. However, if such a company were to issue unregulated tokens, the leverage over their user base could see a flood of public adoption.
“Stablecoins are right now primarily used for speculative purposes,” Chopra told the House Financial Services Committee. “But one could imagine that if it starts riding the rails of some of the large networks or big tech companies it could scale very, very quickly.”
Alarmed by stablecoins’ growth to a $131 billion market, Chopra noted that the CFPB was only one of several agencies concerned about their systemic risks. Recommendations on how to regulate tokens are expected from the President’s Working Group on Financial Markets as soon as this week.
BIS’ similar concerns
Earlier this year, the Bank for International Settlements (BIS) expressed a similar concern over the sudden adoption of privately issued coins. Citing Facebook’s original intention for its Libra digital currency to potentially serve as a universal currency, BIS warned that governments could eventually lose control over the money supply.
It is for this reason that BIS advocates for the development of central bank digital currencies (CBDCs). Discussing the potential for CBDCs in its latest Annual Economic Report, BIS said the technology could enable a “virtuous cycle” of broader access, lower costs, as well as better services. “CBDCs and open platforms are the most conducive to a virtuous circle,” the report notes, as opposed to a “vicious cycle” of data silos, market power, and anti-competitive practices.
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